The consumer price index rose by by 2.2% - Higher inflation than the mid-range of Bank of Israel

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by Ifi Reporter Category:Government Sep 14, 2021

The consumer price index rose by 0.3% in August, the Central Bureau of Statistics announced today. In the last 12 months, the index has risen by 2.2%, an increase that reflects high inflation above the mid-range of the Bank of Israel.
Price increases were recorded in volatile items, including fresh vegetable and fruit items, which rose by 2.6%. Culture and entertainment items, which were in high demand during the summer months, rose by 1.6%. Significant price decreases among the main items were recorded in the clothing and footwear item, which decreased by 1.7%.

Apartment prices continued to soar during June-July 2021, rising by an average of 1.3% compared to May-June 2021. The increase in apartment prices since the beginning of the year now reaches 8% compared to the same period last year. The Jerusalem District led the increases with 3.5% and the Central District an increase of 2%.
The increase in apartment prices was also due to increases in construction inputs. The price index of residential construction inputs rose by 0.6% in August 2021. From the beginning of the year, the price index of residential construction inputs rose by 4.3%, and in the last twelve months (August 2021 compared to August 2020) the price index of residential construction inputs rose by 4.5%.
However, another index in the field of construction, which is followed by the Central Bureau of Statistics and also affects those who have already purchased an apartment on paper or in presale in the past two years, is the construction input index. The index causes the prices of new apartments to rise by an additional tens of thousands of shekels, even for those who bought apartments on paper two and three years ago, which are currently under construction.
The index has risen by 4.5% in the last 12 months, between August 2020 and August 2021. This increase embodies a rate of 7% per year, and it effectively eliminates part of the discount of home buyers who purchased an apartment two and three years ago, in light of indexation. This can also mean an addition of NIS 70,000-50,000 per apartment, depending on the ratio of the attached debt.
The construction input index reflects the changes in the costs of materials and services in the construction industry and is affected by the global production processes of building materials during the Corona period - including iron, metal products, plumbing pipes and wood for construction - which have slowed down. In addition, the maritime transport industry is subject to many difficulties, and therefore the transport becomes considerably more expensive. Rising housing prices over the past year in major cities around the world are creating further pressure on the index. There are those around the world who also attribute to US President Joe Biden's statements the possibility that the index will continue to rise - given its intentions to renovate and rebuild many infrastructures as a growth engine for US residents - which could greatly increase construction costs in a few years. .
If we add the increase in the construction input index to the increase in apartment prices, we get a worrying picture that affects prices throughout the country. In the segmentation of changes in housing prices by district in June-July 2021 compared to May-June 2021, price increases were recorded; In the Jerusalem District - 3.5%; Center - 2%; Tel Aviv - 1.3%; South - 0.2%; And Haifa - 0.1%. The Northern District is the only one to have recorded a slight decline of 0.5% recently.
However, an annual segmentation of housing prices by district shows that in June-July 2021 compared to June-July 2020, annual price increases were recorded, which are actually led by the Northern District (9.9%) - despite the intensive land market price per occupant in the Krayot, Acre and Nahariya - which were supposed to stop The increases. After the Northern District, the annual increase is also reflected in the other districts: Jerusalem (8.8%), Central (8.6%), Tel Aviv (7.5%), South (6.4%) and Haifa (5.1%).
It is hoped that after more than two years lost to the housing market - left without government control and damaged by a lack of approved state budgets and a significant government plan - ministers in charge of the sector will stop saying: "It's not in our control" or The riot of contractors and banks over rising land prices - especially in the center of the country. The quiet danger lurking for home buyers is a possible change in the coming years in the interest rate environment and in the mortgage terms of the banks that will weigh even more on the cost of the apartment.

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